Court rules no jurisdiction to order security for costs on an inquiry under cross-undertaking

26/03/21

JSC Karat-1 and ors v Tugushev [2021] EWHC 743 (Comm)

The High Court (Mrs Justice Cockerill) has today ruled that it has no jurisdiction to make an order for security for costs against the applicants to an inquiry under a cross-undertaking given in a worldwide freezing order that was subsequently discharged.

The application arose in proceedings described by Mrs Justice Carr [2019] EWHC 645 (Comm) as a “bitter and high-profile battle between two Russian businessmen”.  The claimant, Mr Tugushev, claims a 1/3^rd share in the Norebo Group, an international fishing business worth an estimated $1.5bn.

Mr Tugushev obtained a worldwide freezing order (WFO) against the first defendant Mr Orlov. Following a hard-fought jurisdiction battle in which Mr Orlov spent over £4m on legal fees, served 35 witness statements and 15 expert reports, the Court ruled in favour of Mr Tugushev on jurisdiction but subsequently discharged the WFO on the basis of a failure to make inquiries and that there was not sufficient risk of dissipation.  

Subsequently, 12 companies in the Norebo Group applied for an inquiry into losses they allegedly suffered as a result of the WFO. This is set down for trial in July 2021. 

Mr Tugushev applied for security for his costs of the inquiry on the basis that he was properly to be considered a defendant to a claim brought by the companies for the purpose of CPR r.25.12. This required him to submit that commentary in the White Book and in Gee on Commercial Injunctions was incorrect and based on a misreading of the Court of Appeal’s judgment in C T Bowring & Co (Insurance) Ltd v Corsi & Partners Ltd [1994] BCC 713, alternatively that Bowring (which pre-dated the CPR) ought to be distinguished and confined to the wording of the old Order 23.

Mrs Justice Cockerill rejected the application and found that Bowring should be followed. The Court held that the application for an inquiry was not in substance a claim to which Mr Tugushev was in substance a defendant. Rather it fell within the previous continuum of authority such that “[e]ven if it may not quite be technically right to say that the court lacks jurisdiction to grant security for costs in this case, the position is one which is akin to such a lack of jurisdiction”.

The judgment is here.